QUALIFIED INDORSER

A: It is just like any other negotiable instrument, only that, the person indorsingdoesnt warrant the solvency of all prior parties.Take not, only the solvency isnt warranted, all other characteristics of an indorserwill apply.Sec. 65. Warranty where negotiation by delivery and so forth. Everyperson negotiating an instrument by delivery or by a qualified indorsementwarrants:(a) That the instrument is genuine and in all respects what it purports to be;(b) That he has a good title to it;(c) That all prior parties had capacity to contract;(d) That he has no knowledge of any fact which would impair the validity of theinstrument or render it valueless.But when the negotiation is by delivery only, the warranty extends in favor of noholder other than the immediate transferee.The provisions of subdivision (c) of this section do not apply to a person negotiatingpublic or corporation securities other than bills and notes.If you noticed , there is no guarantee that he will pay on the instrument.Differentiate that on sec 66- general indorser, the last paragraph.Sec. 66. Liability of general indorser. - Every indorser who indorses withoutqualification,warrantstoallsubsequentholdersinduecourse:chanroblesvirtuallawlibrary(a) The matters and things mentioned in subdivisions (a), (b), and (c) of the nextpreceding section; and(b) That the instrument is, at the time of his indorsement, valid and subsisting;And, in addition, he engages that, on due presentment, it shall be accepted or paid,or both, as the case may be, according to its tenor, and that if it be dishonored andthe necessary proceedings on dishonor be duly taken, he will pay the amountthereof to the holder, or to any subsequent indorser who may be compelled to payit.And in addition------There really is a difference between qualified and general indorsers. When it sayswithout recourse that means you cannot go after him.You cannot go after him for purposes of payment ONLY. If it is for anyother reason, other than insolvency, the qualified indorser can still heldliable.

For example. There was forgery, the person primarily liable, did not pay theinstrument, and here is a qualified indorser after the forgery. You cannot raise thedefense of forgery because it is different from insolvency.What do you mean by qualified indorsement?Sec. 38. Qualified indorsement. - A qualified indorsement constitutes theindorser a mere assignor of the title to the instrument. It may be made by adding tothe indorser's signature the words "without recourse" or any words of similarimport. Such an indorsement does not impair the negotiable character of theinstrument.CONDITIONAL INDORSEMENTSec. 39. Conditional indorsement. - Where an indorsement is conditional, theparty required to pay the instrument may disregard the condition and makepayment to the indorsee or his transferee whether the condition has been fulfilledor not. But any person to whom an instrument so indorsed is negotiated will holdthe same, or the proceeds thereof, subject to the rights of the person indorsingconditionally.

XF

F collects on the instrument against X. He can collect from the person primarilyliable.Q: If the condition is not yet fulfilled, can X be fulfilled to pay on the instrument?A: Only, when the instrument is already due.Q: If X made a payment to X, does that mean that F will have to hold on with thatinstrument in trust of C until the condition is fulfilled?A: That provision only applies to the conditional indorser, who, in hisoption, may disregard the condition that he made when makes thepayment but the person primarily liable can still be compelled only when itis overdue.Q: For example, Cs condition is already fulfilled, the instrument is not yet due, can Fgo to X?A: No, because the obligation is not yet due, you can just go to C and ask paymentthat the condition has already been fulfilled, then C can go after X when theinstrument is already due.Q: Why can C be compelled to pay on the instrument?

A: Because he is the one who made the condition on the instrument, so he can beheld liable.Student: Can C be held only secondarily liable and raise it as a defense?A: Yes, C can always raise the defense that he is only secondarily liable and presentthe instrument to the person primarily liable because after all this is a negotiableinstrument and he is the one who promises to pay the instrument.

JOINT INDORSEMENTSec. 41. Indorsement where payable to two or more persons. - Where an instrumentis payable to the order of two or more payees or indorsees who are not partners, allmust indorse unless the one indorsing has authority to indorse for the others.Examples:Pay to B or C or several.Pay to B and CGR: It has to be indorsed by B and C.EXC:1. When they are partners,2. When either of them is authorized by the other.Sec. 42. Effect of instrument drawn or indorsed to a person as cashier. Where an instrument is drawn or indorsed to a person as "cashier" or other fiscalofficer of a bank or corporation, it is deemed prima facie to be payable to the bankor corporation of which he is such officer, and may be negotiated by either theindorsement of the bank or corporation or the indorsement of the officer.Q;What is the effect if the instrument is indorsed in favour of the cashier?A: It is payable to the corporation of authorized officer.Pay to cashier, it is actually intended to the cashier of a corporation or theparticular establishment, you do not automatically say that it is intendedfor the cashier personally, but this is just a presumption, it is rebuttable.It is not necessary that it be addressed to the cashier or the president of thecorporation. It may also be addressed to the authorized persons of the corporation.For in the first place, it is not in favour of the person of the cashier or the presidentthat the instrument is drawn.

Sec. 43. Indorsement where name is misspelled, and so forth. - Where thename of a payee or indorsee is wrongly designated or misspelled, he may indorsethe instrument as therein described adding, if he thinks fit, his proper signature.Q: What if it the name of the payee or indorsee is misspelled?A: The person can disregard the misspelled name or correct the misspelled name.SEC. 44. INDORSEMENT IN REPRESENTATIVE CAPACITY. - Where any person isunder obligation to indorse in a representative capacity, he may indorse in suchterms as to negative personal liability.You negative a personal liability by disclosing the name of your principal or byindicating that you are just an agent.

Sec. 45. Time of indorsement; presumption. - Except where an indorsement

bears date after the maturity of the instrument, every negotiation is deemed primafacie to have been effected before the instrument was overdue.The presumption on the type of indorsement is that you are only a holder in duecourse.

PLACE OF INDORSEMENT.Sec. 46. Place of indorsement; presumption. - Except where the contraryappears, every indorsement is presumed prima facie to have been made at theplace where the instrument is dated.It is important because negotiable instruments are governed by the law of thecountry where the instrument is drawn.Sec. 47. Continuation of negotiable character. - An instrument negotiable inits origin continues to be negotiable until it has been restrictively indorsed ordischarged by payment or otherwise.Until when is the instrument negotiable?GR: An instrument is negotiable in its origin until paid or restrictively indorsed.Payment is one form of extinguishing an indorsement.STRIKING OUTSEC. 48. STRIKING OUT INDORSEMENT. - The holder may at any time strike out anyindorsement which is not necessary to his title. The indorser whose indorsement isstruck out, and all indorsers subsequent to him, are thereby relieved from liabilityon the instrument.Q: What is the rule in striking out the instrument?I promise to pay A or bearer P100

Sgd XAt the back(blank)Sgd. APay to CSgd B

D can directlytrace its titlefrom X.

Pay to D

Sgd CD can strike out the signature of A.In all instances when you are dealing with a bearer instruments, allindorsements made therein can be stricken out because it is nevernecessary to the title of the person who acquires the instrument.The bearer instrument can be negotiated by mere delivery.It applies only to the bearer instrument, one originally drafted as a bearerinstrument.Q: What if the instrument is originally an order instrument?A:The holder cannot strike out their signatures because they are necessary for themto acquire title.Pay to BSgd. APay to CSgd BPay to DSgd C

As the holder of the instrument, D cannot strike out any of the signatures becausethey are necessary to acquire title.If we strike out any of the indorsement, D has not acquired the instrument. How didC got hold of the instrument?Therefore, you can never strike out any f the indorsements in a special indorsement,because it did not change the nature of the instrument from order instrument tobearer instrument.How then, will we be able to strike out indorsements in an order instruemt?When at first it was an order instrument then it was indorsed in blank, so, we canstrike the signature of the special indorser because the instrument now becomes abearer instrument.

Pay to BSgd. APay to CSgd B( blank)Sgd CPay to ESgd DPay to FSgd EAfter anindorsement inFind where there is an indorsement in blank.blank,After all , subsequent indorsements can be strickenout. subsequentparties can beSSBBSS

SB

AC

SS

BH

CI

SEC. 49. TRANSFER WITHOUT INDORSEMENT; EFFECT OF. - Where the holderof an instrument payable to his order transfers it for value without indorsing it, thetransfer vests in the transferee such title as the transferor had therein, and thetransferee acquires in addition, the right to have the indorsement of the transferor.But for the purpose of determining whether the transferee is a holder in due course,the negotiation takes effect as of the time when the indorsement is actually made.Striking out will also apply to prior parties, not only in special indorsements in orderinstrument.S

B-

INDORSEMENT IN BLANK

S-SPECIALINDORSEMENT

XC

AH

BI

Take note: The first indorsement of C is not necessary for J to acquire title of theinstrument.C got its title from B.